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tv   Your Money  CNN  January 12, 2013 10:00am-11:00am PST

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a month-long python hunting challenge under way in florida in the everglades right now. wildlife officials are using this novel way to rid the area of the snakes. over 400 people have signed up, completing safety training online. but some experienced snake hunters are worried that may not be enough for amateurs to stay safe. we've got a packed afternoon ahead of us in the "cnn newsroom." dr. sanjay gupta will tell you and myself how to keep our families protected against the flu epidemic. we've got the scoop on tomorrow's golden globe awards. and we'll give you the inside track on how hillary clinton is doing now that she's back at work after a blood clot. and what's really going on
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behind the scenes of the gop as president obama prepares for his second inauguration. those stories and much more ahead. next, ali velshi explains why we still don't have a budget and how our elected officials have bungled a basic business process most of us handle with ease. a must see. "your money" starts right now. jo america's road to economic recovery is wide open, right in front of us, if our elected officials don't put major blocks in your way. i'm ali velshi. debt ceilings, budgets and spending cuts are all you'll hear coming out of washington for the next few months. the partisan warfare in washington could put a dent in any recovery. the threat is real. the next battle will be another clash over raising the u.s. debt ceiling. the current ceiling was officially hit on december 31st, but like last time the u.s. treasury is using extraordinary measures to get through about late february or early march.
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if congress doesn't act by then, the government risks not being able to pay some of its bills. republicans seem to think the debt ceiling is a useful tool to limit how much the government spends, but that is not what the debt ceiling law is supposed to do. it gives the u.s. treasury the flexibility to borrow money to pay the government's bills without going to congress to get approval every single time. it has nothing to do with spe spending or debt control. you might want it to be about spending control like i'd like to be in "people's" list of 50 most beautiful people. wishful thinking doesn't make it happen. they can use the debt ceiling as a hostage like they attempted to use the fiscal cliff as a hostage, to get something else done, something they haven't been able to use do using the normal democratic process because that process is broken. the fiscal cliff deal puts off dealing with mandatory spending
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cuts until march 1st. republicans fully spend to use the debt creeling to extract concessions from democrats on spending. they'll target things like social security and medicare. democrats will stand in their way. the u.s. will find itself at another dead end just like 2011, threat on the shut down the government and possibly result in a credit rating downgrade again. but outside washington the road to america's prosperity looks brighter. foreclosures are down. home sales and housing prices are up. the s&p 500, you may have something like this in your 401(k). it hit a five-year high this week. and a rebound in domestic energy production and manufacturing could lead to a true economic renaissance in america. u.s. oil imports next year will fall to their lowest level in 25 years. this is in part because more supply is coming online in america. already the boom in natural gas extraction has brought prices down to historic lows. all that could mean more high. paying jobs in energy, in
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manufacturing, and technology. add all of that up and this economy is poised to soar as long as washington doesn't bring it down. fareed zakaria is the host of "fareed zakaria: gps." the deals to temporarily avoid the fiscal cliff that may have ruined any new year's plans, you correctly stated, was a small victory for sanity. the greater issue is what is missing from that deal and the many cliffs we'll encounter, the debt ceiling cliff, the skwesation cliff, and then the budget battle. does this stand in the way of the stuff you and i talk about could be happening in our country? >> in two senses. you're a business, imagine a company that does business with the defense department. this is a huge part of our economy. >> sure. >> if you're watching this sequestration madness or the debt ceiling madness, are you going to be hiring new people? are you going to be expanding production? no. you're going to be wondering to yourself is the defense
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department budget going to be cut by 20%, 10%? >> you will hesitate to make certain business decisions particularly hiring. >> exactly. and republicans often talk about how uncertainty makes businesses not expand production. >> right. >> this is the biggest uncertainty, is the craziness over the debt ceiling and the second biggest is the sequestration. there's that piece of it. there's the broader piece, which is we need to do more than just have a cyclical upturn. what you were describing elegantly, exactly right, there is a cyclical rise of return of the american economy. housing is up, energy production is up. but there's a broader issue, which is how do we get the kind of growth we used to have in this country, 3%, 4% growth? in order to do that, we have to invest more in this economy. we're investing half as much as we used to in infrastructure. we're investing half as much in science and technology. and we're investing much less than we used to in core areas of education -- state universities,
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for example, are being decima decimated. if you don't invest for the future, where are you going to get the growth? >> but in 2008 and 2009, invest became a bad word. it became government spending. when you're talking about investing, you're talking about a sophisticated manner. some government, some private sector, some on their own and some jointly. >> precisely. >> that kind of discussion feels dead on arrival in this political environment where we can't even get a budget done. >> and the problem is we're going to have to do some of this anyway. anyone who owns a home knows this. if you differ maintenance, my boiler is leaking but i'm not going to fix it, that's penny-wise but pound pool foolish. the whole thing will break and cost you three times the amount. air travel. we have one of the world's most antiquated air traffic systems. we need to update the computers. it's $25 billion. we're not spending that money because as you say spending is is a dirty word. but one day you're going to have
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terrible problems or you're going to have -- the system will break down. then it's not going to cost $25 billion. it will cost $50 billion. >> another thing we don't talk about enough. we're talking about spending as if there's this generally irresponsible spending. the bigger issue is entitlements, the growth in what those are going to cost us over time. that's the real threat, the one hardest to deal with because it's stuff people want. >> we don't distinguish between spending that is on consumption, that is i'm giving you a check, whether it's social security or unemployment insurance, whatever it is, interest deduction on your mortgage. that's stuff that is just -- it gets spent. it's not investment for future growth. when you build a bridge, when you upgrade your air traffic system, you're increasing economic productivity. that will produce returns for 150 years. the brooklyn bridge is still paying off. >> you've traveled to country where is business gets done, like india, despite government largely being seen as an
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impediment. won't money find its way around these impediments if there are things to be done? >> no, because in places like india the best thing they have going for them beyond anything else is they're a very poor country. you know, ear just getting basic increases in standard of living. india's per capita gdp is $1,500. our per capita is about $50,000. when you're at our level, when your workers have the kind of wages our workers have, which w want them to have, you aef got to get very smart because you're trying to move up the value chain. we've got to have world-class manufacturing, world-class infrastructure, and a world-class skilled workforce. that's the piece we haven't talked about, investing in education. unless you have all that, yes, we could get economic activity if we were willing to work for, you know, a dollar an hour. but we want to work at $50,000 -- we want to have real advanced highway jobs. for that, you need to get a lot of things right. >> thanks for being with us as always. fareed zakaria is the host of "fareed zakaria: gps."
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tune in for a special, "memo to the president: roadmap for a second term," sunday night, 8:00 eastern. coming up -- >> i will not have another debate with this congress over whether or not they should pay the bills that they've already racked up through the laws that they passed. >> sadly, oh, yes, you will, mr. president. that debt ceiling debate is going to get nasty again, especially since many congressmen don't seem to understand the issue at all. [ male announcer ] this is sheldon, whose long dy setting up the news starts with arthritis pain and a choice. take tylenol or take aleve, the #1 recommended pain reliever by orthopedic doctors. just two aleve can keep pain away all day. back to the news.
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the dealt ceiling is the next self-inflicted crisis congress needs to deal with. the debt limit is not a credit card. it makes me crazy when democrats and republicans and the president continue to use this misleading analogy. it's also not the same as your household budget with a few zeros taken out. for those who don't remember the last time congress pushed us past the debt ceiling, here's how it works. congress and the president spend money by creating bills and signing them into law. that is when the money is committed. last year the u.s. government spent $3.8 trillion. two-thirds of that, the green, came from revenues, mostly taxes. the rest of it, the red, came from barroing. that's the deficit. the subtotal of all these annual deficits plus the interest on it is the national debt. today the national debt stands at $16.4 trillion.
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the treasury the empowered to borrow money to support that but that's the debt ceiling. they are em bowered to borrow the money and write the checks to pay the bills already incurred by your democratically elected congress. today the debt creeling is $16.3 trillion, which is less than our testify sit. the u.s. breached the debt ceiling on december 31st, but the treasury can use what it calls extraordinary measures to raise an extra $200 billion. those extra funds will only last until about middpeb -february o early march. good luck trying to explain this to conservative talk radio show host rush limbaugh. >> that's right, rush. the debt ceiling was created so
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that congress wouldn't need to constantly authorize the treasury to borrow more money. raising the debt ceiling doesn't authorize any new spending. it authorizes payment. it does not increase deficits. it just allows the treasury to pay for the things that the u.s. government has already bought. if congress doesn't raise the debt ceiling, treasury won't be able to pay the bills and the u.s. government will start defaulting on some of its obligations. here is what happens for instance on february the 15th of this year. the federal government will take in an estimated $9 billion in revenue. that's the good news. but compare that to the $52 billion in bills that it will need to pay, everything from interest on the debt to pay for members of the military, the bipartisan policy center estimates that roughly 40% of the bills for the month would go unpaid. now what's the consequence of not paying? the truth is nobody really knows since it's never happened before, but you try telling american express you're not paying your bill this month because you spent too much money
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going out to dinner last month. even talking about not raising the debt ceiling in 2011 caused the s&p to lower the u.s. credit rating because investing in u.s. debt is so safe. interest rates are low, 1.58% for ten-year bonds. but missing an interest payment could cause rates to rise. that's still not enough to sway some members of congress. they say they need to hold the debt ceiling hostage to get spending cults. rod johnson is a republican senator from wisconsin a member of the senate budget committee. as i said the debt ceiling is not about future spending. it is for paying for bills that we already bought. whether or not you think we should spend less money in the united states, do you agree with my premise? >> no, i don't, ali. hello, by the way. what the debt creeling is all about is providing the president the authority to borrow more money, put that on the backs of our children and grandchildren. there's no doubt we are not going to default on our debt.
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what the debt ceiling allows -- what the debt ceiling allows congress to do is continue to deficit spend. if we would stop incurring deaf zits we wouldn't need to increase the debt ceiling. it's not about paying past bills. you get into the cash flow aspect of this thing. in order to increase the debt ceiling we are actually just basically giving the president the authority to put that debt burden on our children and grandchildren. it's not about spending at all. >> let me ask you a couple questions here. >> deficit spending. >> you said there's no doubt we are not going to default on our payments. the math indicates that if at some point we don't increase the debt ceiling, why won't we? >> our interest payment this year is under $250 billion. we're going to bring in $2.5 trillion in tax revenue, ten times what our interest servicing on the debt is. there are some casual aspects about turning over some debt but basically the only reason we have to increase the debt creeling is because we continue to deficit spend, spending a
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trillion dollars more than -- >> when you say we continue to deficit spend, we have deficit spent under this entire administration, under the entire previous administration, as well. this isn't new. we never don't deficit spend. we've hardly ever not. we're not going to get there anywhere soon. why would you pick this moment to have that -- >> we need to stop doing that. >> you can't. can you come up with a budget? paul ryan couldn't come up with one. >> paul ryan did pass a budget in the house. where we haven't passed a budget is in the united states senate controlled by democrats for over three years. >> right. >> what we need to use the debt ceiling moment as is a moment to educate the american public about all the deficit spending, the fact that we blew through, by the way, a $2.1 trillion increase in the debt ceiling in just 17 months. >> right. >> ali, it took us 200 years to incur that to 1986. we blew through that same amount in 17 months.
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we have got to start reducing spending, reducing our deficit. >> the debt creeling is a technicality. you're talking about the budget, talking about federal spending. let me show you a piece of an editorial from "the wall street journal." i'll get your comment on this. they said you can't take a hostage you aren't prepared to shoot. that is charged language these days so i don't want to ask you about hostages and shooting but in a different way. do you understand that the consequences or what the consequences are of the u.s. even technically defaulting on its financial obligations and are you willing to let that happen? you talk about interest rates, but the u.s. government has a lot more to pay than interest. >> ali, i don't want to play brigmanship here. when you start coming to the terms of the fact we cannot continue to run deficits over a trillion dollars per year. >> right. >> what's going to happen is our interest rates will increase and then interest expense -- if we just revert to our 30-year average interest cost from 197 to 1999 that adds $600 billion in interest costs per year. that is what we are trying to
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prevent. >> right. >> my suggestion would be start increasing the debt ceiling in incremental amounts until we get president obama to get serious about reducing spending -- >> you will vote to increase it in an incremental amount. >> listen, there's a very good construct in terms of giving, you know, $1 increase the debt ceiling for every $1 in deficit reduction. that's what we have to start using the debt ceiling to impose that spending discipline on this administration. face it, president obama is saying we don't have a spending problem. we have a spending problem, this nation. we have a deficit spending problem. >> right. >> we should be doing this incrementally. this is this debate is not going away. >> we've heard both sides, bumper stickers. back to my example of february the 15th. we had $52 billion in committed spending, $9 billion in money we're taking in. by the way, there isn't a chest of money sitting around for the extra stuff. i have a list there. interest, the biggest part. $30 billion. taking in $9 billion, have $30
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billion in interest. you say there are other ways to handle that. tax refunds, federal salaries, military pay, $2.7 billion, medicare and med cape $2.3 billion, defense vendors, $1.5 billion, other stuff $4.4 billion. which one are you cutting, sir? >> you're taking a look at one day's -- >> i could pick any day. >> let's take a look at the year. in a year we will get about $2.5 trillion wortth of tax revenue. last year we spent $3.5 trillion. if you utilize the social security trust fund to make the social security payments, that's another $775 billion. now you're up to revenue of over $3.2 trillion. base kwli you're funding all of government. that's why we need to look at this. i don't want to play brinksmanship. we should make sure we can fund as much of government as revenues coming in. but we have got to start seriously taking a look at how we reduce the rate of growth in spending. that's what we're talking about. nobody's talking about cutting
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government in total but reducing the rate of growth in government so we stop adding this burden of debt to our children and grandchildren. that's what this debt creeling is is about. how much are we going to allow the president to increase the debt burden on our children and grandchildren. he says he doesn't even want to have that debate. listen, anytime we talk about that should be a very serious debate. we have to start -- >> i get you and i hear you. i'm glad you don't want to play brinksmanship. i guess my point is the raising of the debt ceiling beyond the money we're at right now is for money that is already committed. that is not actually more spending. >> it is not. it is not. it is to pay for additional deficit spending, which i agree with you, nobody says we can start balancing our budget immediately. >> right. >> but what republicans are saying is if you're going to increase the debt burden on our children, at least start working with us to restrain the rate of growth in spending over the next few years so we can finally start bringing our budget into balance so we done totally
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mortgage our chinn's fldren's f. >> we'll discuss that later in the show, why we don't have budgets. senator, thanks for taking the time. >> have a great day. senator johnson is republican from wisconsin. he is on the senate budget committee. this fiscal cliff nonsense, the sequester, the exploded debt and deficits. how did we get here? it all started with the budget and it's worst than you think. we haven't had one in almost four years. warren buffett had this solution. >> i could end the deficit in five minutes. pass a law, any time there's a deficit more than three times gdp all members of congress sitting are ineligible for re-election. when it comes to your smile, if you're not whitening, you're yellowing. crest whitestrips whiten as well as $500 professional treatments. guaranteed. crest 3d white whitestrips.
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with multiple lacerations to the wing and a fractured beak. surgery was successful, but he will be in a cast until it is fully healed, possibly several months. so, if the duck isn't able to work, how will he pay for his living expenses? aflac. like his rent and car payments? aflac. what about gas and groceries? aflac. cell phone? aflac, but i doubt he'll be using his phone for quite a while cause like i said, he has a fractured beak. [ male announcer ] send the aflac duck a get-well card at but i'm still stubbed up. [ male announcer ] truth is, nyquil doesn't unstuff your nose. what? [ male announcer ] alka-seltzer plus liquid gels speeds relief to your worst cold symptoms plus has a decongestant for your stuffy nose. thanks. that's the cold truth!
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it's clear since the fiscal cliff debacle that uncle sam's biggest problem is in his wallet. it's been almost four years since your federal government had a real budget. there are some political stunts to make it seem like budgets were failing in congress, bims put forward for an up-and-down vote. that is not how is testimony works. that's not how it's designed to work. christine romans is the host of "your bottom line." a lot of misinformation. if government were working properly, how old we get a budget done? >> it is a complex process and it starts with the president. by law the commander in chief is the one who's required to submit
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a budget proposal to congress before the first monday in february, ali. since the constitution grants the power of the purse, though, to congress, final budget decisions are really up to it. so let's talk about that. once the proposal gets to congress, budget committees in the house and the senate, they work with public officials and other congressional committees to decide on a budget resolution. and that's writ starts to get interesting. the budget resolution serves as a guide for all spending and revenue decisions for the year. at least that's how it's supposed to work in theory. but none of this has happened since 2009. >> we're going to discuss why, christine. thanks very much. why don't we have a budget? gridlock, basically. harry reid, a democrat, says it was not worth trying to go through the process of passing the president's budget. that's why you hear that old republican saw that harry reid won't even present a budge tote the senate. you may have also heard the of the-repeated claim that president obama's budget was struck down in the house and the senate, getting zero votes. goose eggs from either party.
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but those bills were not the budget. they were shell versions of the president's budget put forward by republicans designed to fail. they were not budgets. they were just politics. republicans did put out their own budget plan in the form of paul ryan's path to prosperity, but bipartisan bickering resulted in tho progress there either. part of the reason our government has been able to survive without a budget is because of something called continuing resolutions, which are essentially an extension of the existing budget. so it is not true, as many of you enjoy tweeting me, that the u.s. doesn't have a budget. we just haven't had a new one in some years, and that is a bad thing. also not true that obama's budget got no votes because that wasn't his budget. but the sad truth is we don't have a new budge net the united states, a new one, and there are consequences for that, not the least of which are the dozen or so close calls with government shutdowns in the past few years. we'll probably face another one in the coming weeks. those continuing resolutions, they're short term, avoid
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tackling long-term problems like federal debt and the deficits. the uncertainty of that short-term thinking wreaks havoc on businesses and their investment and on employment. look no further than the debt ceiling showdown in summer of 2011 that led to the budget control act, which was a last-minute deal to raise the debt ceiling in exchange for automatic cuts that were to take place at the end of 2012. you know those as the sequester, which i've said many times is a stupid name for a stupid thing that only washington could come up with. big surprise with those sequester cults, by the way. washington gave themselves another extension, two more months, to march 1st. america has another cliff to worry about going over. these people are worse than a fourth grade flunky. why not just say the dog ate my homework? that mangy dog has become the u.s. political process. christine, you've often said america's cheap egs port these days seems to be economic uncertainty. incredibly, that only seems to
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be getting worse. what's the likelihood of this changing? >> i think when you have all these mini cliffs ahead of us, you'll see a lot of politics ahead of us in the next few weeks and months, but this might be capitulation. right? this might be this moment where you're going to see the system thrashing around, gettinging through this, and the optimist in me says after that you're going to have deficit reduction, an eye to debts and deficits and a blueprint for what kind of country we're going to be, because that's what a budget is. the budget is the blueprint for what your priorities are, what your vision is for the american standard of living. the continuing budget resolutions nothing like a vision. i think if you can get through this tortured time over the next maybe three to six months, maybe after that we'll start talking about what the vision is going to be for america again. >> let's hope you're right. the last congress accomplished something the u.s. hasn't seen in at least 40 years. as usual, it's much ado about nothing.
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i'll explain. and rolling stones' matt taibbi names name and says the worst of wall street is yet to come. dthd tib this is america. we don't let frequent heartburn come between us and what we love. so if you're one of them people who gets heartburn and then treats day after day... block the acid with prilosec otc and don't get heartburn in the first place! [ male announcer ] one pill each morning. 24 hours. zero heartburn.
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. you never want a serious crisis to go to waste. what i mean by that is an opportunity to do things you thought you could not do before. >> congress has been seizing those opportunities left and right. nothing happens unless severe consequences are looming. that has led to the least
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productive congress in 40 years, the 112th congress that just left washington and enacted 220 laws. less than up with half what was aahed five years ago. compare that to the late 1980s when congress enacted more than 600 laws each four-year term. i want to bring in will cain, conservative cnn contributor, chrystia free land, the editor of thompson reuters digital, richard quest, the host of "quest means business" on cnn international. i want to show our viewers this time line you sent us. you called these do or die moments in washington. in late 2010, democrats and republicans started a fight over extending the bush tax cults for wealthy americans ultimately president obama signed an extension of the tax cuts for all taxpayers. now, four months later, the president and congressional leaders cut a budget deal that cut $38 billion in federal spending for the year. that agreement, if you recall, came less than two hours before
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the government would have shut down. in august of the same year, the white house and congress were in the same position they're in now, bumping up against that debt ceiling. that provision of the deal created the fiscal mess which we have still not solved. and congress closed out 2011 with the payroll tax cut and unemployment benefits two days before christmas. he had another massive fight on a relatively modest stopgap measure that both sides had largely agreed on. of course i don't need to remind you about the fiscal cliff fight we just got done with. congress could not come to an agreement even as massive spending cuts and tax hikes were scheduled to take effect. but congress still hasn't had enough. three more fights looming. if the debt ceiling is isn't raised by mid-february or early march, the government won't be able to pay its bills, putting the credit rating at risk and damaging the recovery. while congress disresolve the tax porss of the fiscal cliff they put off a decision on the sequester, those spending cuts,
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and that fight plays out in march. finally, because the president and congress have not been able to agree on a budget since april of 2009, the u.s. government is operating on these continuing budget resolutions, the current one expires at the end of march. you say this dysfunction is a symptom of an underlying problem that we are not talking about. please explain to me what that is. >> that schedule you laid out has been extremely advantageous to you and this program because it's giving you something every four or five months to talk about. >> yep. >> appropriately so. you look at congress, and particularly sometimes you have folks there seeking leverage to get essentially the federal budget in order, to fight over what our priorities are in spending and taxes. you know what, sometimes i think you're 100% right. i done like seeing republicans do this in particular as a means to get something done. the fact that for 44 months this
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congress has not passed a budget. 44 months, almost four years. we have no ideas what the priorities of this government are. >> as christine pointed out, the budget are the priorities of a government. i want to discuss how serious this might be, chrystia. let me show you this poll from gallup, about the way politics work in washington. more than three quarters of americans say that it is causing serious harm to the united states but 52% say, this other poll, are optimistic that the way politics works will improve the next ten years. i think e they also think we're going to domesticate unicorns. in november they voted to keep washington divided. democrats control the senate, republicans control the house of representatives. why would anybody think this is getting better? >> there is something known as the optimism bias, well-known in social science. we all tend to be a little more optimistic than our real experience tells us. and you know what, i love the optimism bias.
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that's what makes you, you know, believe you can write a book even if you can't make the deadline, believe you can get up and face the day. thank god for the optimism bias. i think this is just a view, not social science backed, but my personal belief as a non-american who loves america, is americans are particularly prone to the optimism bias and that is great. having said, that when it comes to these political battles, you know, i think actually a do-nothing congress is not always a bad thing. >> i agree. >> not tackling things, not legislating is not always bad. >> when i tweeted that information out, somebody said to me the job of congress is not just to pass as many bills as they can. >> right. exactly. right now i think these artificial crises, because they are man made, not things that the world economy is forcing upon the united states, in contrast, say, with europe, i think the best thing for america, for anyone who runs a business, anyone who wants a job, would be if the debt
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ceiling and the sequester, people just forgot about it for 12 months. >> interesting point. before you go there, i want to ask you something. chrystia made a point we may be lying to people about because we say it all the time. businesses hate uncertainty. all we've had is uncertainty. seriously, for five years. and the stock market is at a five-year high. >> you can call this certainty. >> right. >> frequency that it will happen again. >> is this the new normal and it doesn't matter? can we forget about this and move on? >> they like certainty and markets will wobble if there's no certainty, but business gets on with doing business. they learn how to trade in the most unfavorable scenarios. look at the great recession, 2008, 2009. business knows what has to be done. it has to cut back, spend more, all those sorts of things. it has to shift production. it may be uncomfortable, unpleasant, shifting production to low-cost environments. business corporations and companies, they know what has to be done. they just wish this lot would get --
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>> and the main point, ali, you talked about the fragile recovery. and it is fragile, but it is a recovery. and i think that now that washington has gotten past the big tax debate, the best thing would be do no harm. it's a fragile recovery. let it get stronger. this is not the time for the grand budget bargain that some people are talking act. >> both people have pointed out things i would agree with. >> don't be so surprised. >> the fact business is resilient and can operate in a worst case environment. >> it has to. >> we wish it wouldn't have to. i want to underline something chrystia said. just because you paz more laws than a congress that may follow you does not make you a better congress. some of this crises is natural. it's going to happen when you must make difficult decisions about your spending and taxing. it's natural consequence of a big, big choice. >> it's also a product of the system you've got. i'm with you. love this country, lived here, but it's the system you've got.
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>> an efficient parliamentary system would be so much better to get things done. always. >> it does get things done. >> richard might disagree, there are certain things for which the american political system works better and certain thing where is the parliamentary system works better. >> the key is what you want to get done. >> the other issue is the american system is well designed for a country which has an effective political consensus. the divided government, which is structurally there, works when you have parties that are able to come to an agreement and do deals. reality right now is i think the nation is quite fundamentally divided and certainly the elected representatives are very divided. it hasn't always been like this. >> i'm going to stand up for a bit. >> i'm the only american standing at this table. >> what the rest of the world cannot have is more of what you
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were just showing, month after month after month. >> but that's what you guys did in europe. you must feel good, we're just as disorganized. will is not shaving the beard until debt creeling is raised. good to see you. richard, stick around. you won't have tim geithner to kick around anymore. >> as a kid growing up in queens, i had dreams of making a difference in the world. >> jack lew gets to make the difference now as the next treasury secretary of the united states. will he make a difference? [ male announcer ] count the number of buttons
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new term, new treasury secretary. president obama has nominated jacob jack lew to be his next treasury secretary. he is 57 years old, got the weirdest signature ever, which is soon going to appear on a dollar bill near you. he's been the white house chief of staff, described as a budget wonk and a consummate washington insider. lew's done two stints at the head of the office of management and budget under presidents obama andclinton. he was a key player during the 2011 debt ceiling talks that almost shut down the government.
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he'll have his work cut out because democrats and republicans are gearing up for another battle over extending the debt ceiling while the global embarrassment that serves as economic policy debate in washington these days i've got a hunch that tim geithner won't miss taking part in another showdown. why should the rest of the world care if jack lew or anyone else is running the u.s. treasury? joining me now, taking off his jacket, hiss suspenders for a little q&a. i'll do the same thing. get rid of the jacket here. vests and suspenders. vests and bracers as you call them. richard, does it really matter who the u.s. treasury secretary is for the rest of the world? give me 60 seconds on your bell. generally, i doubt most americans are all that concerned about the treasury secretary. but in 2008, who it was mattered a lot to the world. tim geithner was the right guy at the right time because the global banking system was teetering on the edge of
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collapse. he knew the ins and outs of wall street, commercial banks, global credit and central banks. he could in obama's words hit the ground running. jack lew is a budget wonk and his nomination will be mostly an american affair. this time around the u.s. has a budget problem, and it's an internal problem. they blew a hole in the american hull but china is not going to start selling off its u.s. dollars because the government doesn't have a budget and might shut down again. democrats and republicans cannot agree on how to cut our bloated expenditures, but that, richard, is an internal problem. washington needs an inside man in treasury. ten seconds left. jack lew is an inside man. as long as the world doesn't implode, americans much less the world will pay little attention to who heads the u.s. treasury. what do you think? >> what do i think? it's really very simple. simple once again. it's not as easy as it's now a
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domestic issue with the budget battle. if only it were. this is all about who the man is and what does he bring to the table. if we look back at treasury secretaries, paul o'neill and john snow, they were major men in their own industries. but they didn't -- >> nobody remembers. >> nobody remembers them and they were not huge successes. lloyd benson even. look at what he was. a great man in his field. but did not bring much to the table. now you look at paulson, geithner, summers, ruben, morgan, you don't remember him any more than i do, but the fact is they were the men who actually were able to make the treasury work. now, there's no doubt jack lew comes with the authority of the president and the white house. but he has to go further than that. he has to take the financial community, the g 8s, the g-20, the imf, the world bank. if he can't do that, he is sunk. >> all right. we will be watching this and talking about it a lot. good to see you, brother. richard quest, the host of
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"quest meets business." coming up, president obama gave big props to the man jack lew is replacing. >> when the history books are written, tim geithner's going to go down as one of our finest secretaries of the treasury. >> mike taibbi of rolling stone joins me after the break to tell me why he thinks the president is dead wrong on geithner. why the bailouts may have rescued wall street but didn't fix the economy. d, she can't always move the way she wants. now you can with new stayfree ultra thins. flexible layers move with your body, while thermocontrol wicks moisture away. keep moving. new stayfree.
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bullish attitude that stills rules wall street. aig, remember that name? the trouble withed insurance giant that was given a $182 billion taxpayer bailout to stay afloat, this which can aig considered joining a shareholder lawsuit against taxpayers challenging the terms of the bailout which saved the company and possibly planet earth from financial meltdown. how could they? well, outrage followed and aig said they wouldn't join the lawsuit after all but the company is holding off on giving us the reason why. to be fair, they have publicly thanked for your help. >> we've repaid every dollar america lent to us. >> everything plus a profit of more than $22 billion. >> for the american people. >> thank you, america. >> helping people recover and rebuild. that's what we do. now, let's bring on tomorrow. >> government did turn a $22 billion profit on the deal, and
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i know aig has a responsibility to its shareholder, employees, and customers to be successful. what does this say about the state of wall street in washington right now? matt tie ebeis a masterful writer with rolling stone, i think -- i like matt a lot. he's a little bit crazy but masterful at putting this argument forward. you start withing a and mention that the funds were used in some kays for retention bonuses. this latest chapter doesn't help aig's reputation. you really say the government failed in changing the way wall street thinks. >> no, i think what the real lesson, my assignment was to look at the bailout, was it eb, was it not, what i think we focused on in the end was they told so many lies on behalf of these companies over the years. in the interest of instilling confidence in the markets, that in the end they ended up vouching for a system that was bankrupt or was insolvent. we're stuck vouching for that system now.
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that's the problem. where does that end. when you start lying for a company, you end up having to keep doing it over and over again. you have to publicly endorse the health of these companies. that's the ongoing legacy of these bailouts. >> where does it end is an interesting theme of your story. i want to read a line from it on the first page. it said we thought we were just letting a friend crash at the house for a few days and ended up with a family of hillbillies who moved in forever sleeping nine to a bed and building a meth lab on the front lawn. who are the hillbillies here and who's got the meth lab. >> look at the hsbc settlement last month or the ubs settlement four years ago, could you have imagined we would let banks off for laundering $9 billion for terrorists and mexican drug cartels? the rationale they gave was similar to the rationale they gave for endorsing the solvency of banks that were insolvent. they said we have to do these
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because these are systematically important companies and we can't let something happen to them because if it happens to them, we'll have another disruption. >> you said there might have been some hope in the way the bailout was originally structured. within days it changed into something else and within days it changed into something else. it went from something that was going to help america through its banksing into helping homeowners and banks into something that was just about banks. >> then it became something that what didn't even necessarily help banks. the original rationale is we're going to give a whole bunch of money to healthy, viable banks to help start to grease the economy and start lending all over again and stimulate business activity all over the country. what it turned into is we're going to fill capital holes for failing institutions and get no new lending stimulated and not going to create business and jobs. that's sort of the situation we ended up with. >> the last 30 some odd months where we have actually created jobs and the stock market which a lot of our viewers invest in
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through 401(k)s is at a high. do you attribute any of that to the bailout? >> i do. the question is will it continue. the proof is in the pudding. is the situation sustainable or not? it comes down to do you believe these too big to fail banks are solvent? do you believe in their accounting and they're going to remain healthy or do you believe there's trouble with ahead. >> the way you were coming on is that president obama really, really spent a lot of time talking about tim good nighter and the applause he got in the white house was extended. you don't -- you think tim geithner and so does the inspector general of t.a.r.p., you both think jitner's more part of the problem than the solution? >> i think, you know, i agree with bore rof ski on a lot of these points. tim geithner's legacy, he's going to be remembered the architect of too bid big to
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fail. he had the opportunity to go in and correct a lot of problems, restore fiscal honesty and transparency in the system and instead, they papered over the problem and threw a lot of money at corrupt failing institutions and they created these sort of monsters that now we have to publicly back even when they're laundering money for terrorists and drug dealers. >> you write an article like this, it give s youstrange bedfellows and puts you into bed with a lot of conservatives who say we shouldn't have had the bailout. >> i believe it should have been done differently with conditions. it should have been done in a way that encouraged rans parency instead of papering over problems. but i do believe this is an inherently conservative issue. i think there should be some linkage between liberals and conservatives because it's not partisan issue at all. >> it's a good read. matt's article called "secrets and lies of the bailout," a contributing editor with rolling stone. coming up, this hi-tech jumbo
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quvenzh one week five mechanical glitches and billions of dollars on the line for a major u.s. company. i'm talking about the boeing 787 dreamliner, their latest and greatest hi-tech jet. monday a japan airlines dreamliner filled with smoke after landing. tuesday another had to be towed back to the gate in boston because of a fuel
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